Case study: Quantas

Topic 1- operations

Role of operations management

contributes most directly to business revenue employs normally the majority of the labour resources interfaces most directly with the business customer/client;

Strategic Role of Operations Management

The operations allow quantas to achieve long term survival.

the scheduling, cancellation or rescheduling of flights the monitoring and response to an industrial dispute the reallocation of labour to cover absences in key areas

Cost leadership To use the least amount of inputs to deliver one unit of output. Some ways are:

o Economies of Scaleo Standardisation- The more variations to Oantas' services = higher costo Technology- eliminating the need for Oantas staff to be available to interface the customero Waste Minimisation- deliver the lowest production cost

Differentiation of Product/service the most comprehensive domestic and international coverage Qantas includes comfort based features such as skybeds, special menus, lounges, online check

Interdependence with Other Key Business Functions Human resources- Training and development + Recruitment of staff Finance - monitors, records, and analyses the financial transactions Marketing- connects operations with the customer by providing market requirements

Influences on Quantas’s operations

Globalisationo Launching new airlines= cost minimisation needed

ethical and socialo Health surveillance program- workplace conditions monitoredo water conservation,

Technologyo Newer planes, newer operational processes = new training

Government policieso Deregulation and the carbox tax = higher costso the Fair Work Act = more pro worker which has increased Qantas' operating costs

Environmental impactso Purchasing new, environmentally sensitive aircraft, o Fuel conservation- a trigeneration energy system reduces power usage

Operations processesa. Inputs

Transformed Resources Transforming Resources the resources which are changed by the operations

processeso Materials- fuel + papero Information- statistics + transactionso Customers – customers are moved

resources which effect the changes in the operations process

o Human Resources- employees and staffo Facilities- terminal buildings + holdings,

b. OUTPUTS Customer service refers to how well quantas meets the needs of its customers. It provides feedback, expectations and

supports continuous improvements/.

c. Transformation processesa. Volume- Quantas processes millions of people worldwideb. Variety – Quantas provides a variety of services, national and international servicesc. Variation- Quantas’s demand may increase during school holidays and easter.d. Visibility- the customer can see the workings during operating time and there is a high customer interaction

d. Sequencing and scheduling

The aim to have products out as fast as possible. Quantas uses software to help schedule the time between flights, repairs and down time. In addition, this automates the whole

process so there are time savings.

Technology, task design and process layout

Technology- increased productivity by replacing human capital and automation, e.g. online checking Processes occur in the terminal, hangar and maintenance area. The process layout is where machines and equipment are grouped.

(eliminates bottlenecks + saves time0

Operations strategies

Performance objectives Quality- transactions must be accurate Speed- Customers must be processed swiftly (reduce waiting time) Dependability- The service must be reliable Flexibility- Quantas must be able to change and react to market changes. Cost- Processes must be efficient,

New product design and development Quantas has launched 2 new airlines in the Asia pacific area to take advantage of the growth. QUantas constantly updates services or processes in order to main competitive and profitable.

Supply chain managements This is the controlling of the flow of supplies through Quantas’s operations, to the final customer. Fuel is purchased,

sourced and stored, and moved.o Global sourcing- Quantas sources some pilots from New Zealand, and cabin staff at Asia. Plane maintenance is

done at Malaysia.o E commerce- Quantas has reduced time consuming and manual processes. Real time information can be

provided to customers.

Inventory management system This is the raw materials, unfinished goods undergoing transformation and finished goods. Quantas does not store products to meet customer demands.

Quality management Quality control- Inspections are carried out periodically at key stages to make sure standards are met. Quality assurance – The level of quality at all stages are monitored at Quantas by measurement against standards. Quality improvement- Quantas invites staff to participate in brainstorming ideas and suggestions to improve quality,.

Overcoming resistance to change

Quantas must respond to change in respond to external factors, e.g. terrorist attacks and the GFC. Though there are restrictions to this:

Financial restrictions Human restrictions Cost of new equipment- Billions have been spent New passenger and screening- over 1 billion dollars from

2001 New IT systems-

Inertia- some managers have been unenthusiastic Change in skillset- Engineering staff have started strikes

due to arguments over the changes.

Global factorsFactor ExplanationGlobal sourcing This is sourcing tasks or components for operations at a cost advantages.

Asian cabin pilots have been employed to reduce costs.Economies of scale These are cost advantages due to global expansion.

In Asia, working rates are lower thus Quantas has set up maintenance there.Scanning and learning

Increased globalisation = increased competition + new technology Quantas finds, learns from and tests huge volumes of data so that the systems will suit future customer

bases.Research and development

Quantas researches and develops new methods of improving processes at the airport.

Topic 2- marketing

Role of marketing Marketing allows quantas to:

o Achieve its business goalso Identify and satisfy customer needso Give the business a directiono Focus on market research

Interdependence with Other Key Business Functionso Finance- budgets need to be set out for marketingo Human resources- staff need to be employed and trainedo Operations- The operations may physically limit the amount of staff for operations

Marketing process

SWOT

Strengths Lowering of costs and increased efficiency Largest Australian based airline loyalty programme Excellent safety record Globally recognised name and logo

Weaknesses Relatively complex fleet High labour and operating costs Union disputes Safety incidents

Opportunities Creating a new airline in asia Developing E commerce Evolving aircraft technology

Threats Weakening in the domestic and international market Competition Fuel costs increasing

Product lifestyle

Introduction- Quantas, started a new product and had promoted heavily. The brand awareness was built up. Growth- Profitability increased by 14% in 2010 and routes were expanded. Profitability was achieved for the first time. Maturity- Sales levelled off and competition increased. Many changes were done to the lounge, planes and checking.

Market research Information about customer needs, brand preferences and characteristics were identified. The data source was selected. (Surveys, mail based surveys, complaint monitoring, government statistics, magazines and

interviews)

Marketing objectives Quantas attempted to:

i. Maintain the combined domestic market shareii. Grow Jetstar in asia

iii. Increase customer service standardsiv. Match demand with capacityv. Reduces losses in international departments

SWOT analysis Market research

Marketing objectives

established

Target markets identified

develop marketing strategies

Implementing, monitoring and

controlling

Market segmentation This is the processes of diving up the total market into small groups. It enables quantas to:

o Better meet the needs of the customerso Better tune the marketing mix to certain groups in the market.

The leisure segment is divide into holiday, visiting friends and relatives.

Marketing strategies Positioning

i. This is the image that Quantas has in comparison to its competitors. There may be an image to competitors and the target market.

Marketing mix

Product This is the benefits and attributes designed to suit the

customers needs. They include scheduling features, Frequent flyer schemes (points are earned towards free tickets) , intangible benefits (safety and reliability) and the brand name.

Price This is the cost of the service to the customer. Pricing

methods used are: Cost plus margin- Quantas adds a percentage on

top of the COGS Market- Quantas lowers costs if the market

demand is high Competition- Quantas may lower costs if the

competitors are decreasing prices Pricing strategies include:

i. Price penetration- reducing prices to gain market share

ii. Loss leading- Quantas made a loss in the short term in order to compete against other competitors,

Promotion This is the methods that an organisation uses to

communicate its products for radio, newspapers and posters. Some strategies are:

Advertising – utilising agencies to create media ads for tv, radio, and print media

i. Quantas had spent 44 million dollars in 3 years in order to target corporation.

ii. Quantas produced and displayed an advertisement at the Athens Olympics.

a. Publicity- utilising news releases, press conferences and interviews

i. They supported clean up Australia day, world vision and cultural activities such as the Sydney dance company.

b. Sales promotions- short term inducements during times of huge demand

i. Quantas released 10000 tickets at 49 dollars to promote their airline.

Place This is how the service will reach and be distributed to the

consumer. It can be direct or indirect.a. Direct (selling directly to the customer)

i. Sales via travel centres called “QUantas holidays”

ii. Airport ticket salesiii. Online – Quantas receives over 8.4 million

hits per month,

b. Indirect (using intermediaries)i. Quantas has relationships with travel agents,

such as flight centre and American express.

People This is the appropriate use of the right staff and

people.a. Quantas customers have direct contact

Processes This is the systems used to assist the organisation in

delivering the service. The way the service is reflects on Quantas.

with employees on the ground, and due to this, the staff must have the right personal attributes and training.

Recently, Quantas introducted, “Q Bag Tag” where passenger can drop their bags and go.

Physical evidence This is the environment which allows the consumer again to make judgments on the organisation.

o E.g. terminals and the website design. Global marketing

o This is an extension of marketing across national boundaries. Some global marketing strategies that have been utilised are:

Global branding The same brand/logo (flying kangaroo) >> increases revenue and growth + recognition Packaging and designing costs are reduced.

Standardisation This is the standardising of the many elements of the marketing mix. >>> allows economies of scale to

be achieved. There is the “one world” name and logo on all planes + tickets >> improves corporate image + captures

greater share.

Customisation This is the ability to differentiate the marketing to target different markets. Quantas adjust/tailors its marketing based on the markets. Japanese markets will have Asian dishes and

Japanese fluent speakers.

Implementing, monitoring and controlling the marketing plan o Implementation- the process of turning the marketing plan into action. Quantas undergoes, monitoring, controlling and

adjusting marketing via: Developing financial forecasts of revenue using past sales data and surveys. Estimations are then done after. Comparing actual and planned results- done using (sales analysis + market share analysis + market profitability).

They reveal the current situation of the business. Revising marketing strategies and taking action.

Quantas revised its marketing by reducing prices to stimulate demand, reduced flight frequencies and cancelled orders for new planes.

The current financial position is assessed by

collecting data

The informatiion is utilised to frame the

business

The financial reports are prepared

THe financial reports are interpreted by comparing

it to forecasted results.

The reports are intepreted by comparing them to forecasted

results.

The financial controls are adjusted to

minimise risks and losses.

Topic 3- finance

Role of financial management To manage the financial resources effectively and efficiently so that Quantas may achieve its financial objectives such as growth,

efficiency and return on capital.

Interdependence with other key business functions Marketing- marketing is needed in order for finance to be generated. Human resources- funds are required to renumerate staff and train staff. Operations- funds are required for the daily running of the business.

Processes of financial management

Financial statements Financial statements must comply with corporate, account standards and laws. Some financial statements include balance sheets, revenue statements and cash flow statements.

Comparative ratio analysis Comparative ratio analysis allow Quantas to determine whether they are doing better than the competitors, such as Singapore

airlines and air new Zealand. This comparison involves efficiency, gearing, profitability and return on owners equity.

o Profitability ratios- These ratios indicate the profits and the performance of the business. In 2009, due to the GFC, there was an 89% drop in profits.

o Liquidity ratios- This measures the ability for quantas to meet short term debts. In recent years, the liquidity ratio decreased to .93:1 meaning that their ability to pay debts lowered.

o Gearing- this is the ability to continues the operations, as well as to measure financial stability. Quantas’s gearing increased meaning that there was a risk of not being able to run the operations.

o Efficiency- this is the ability to manage its assets to make a profit. In recent years, quantas’s efficiency has been around 80%. (80% of the money was used to generate profits).

The processes of financial management- planning and implementing

Financial management strategiesGearing control

the gearing was controlled by:o cancelling orders for planeso deferring purchases of assets

Liquidity control

The liquidity was controlled by:o Controlling current assetso Controlling current liabilitieso Leasing more non current assets, e.g. planes and buildings

Profitability managementEfficiency control

new and more efficient planes were purchased New IT systems were implemented Catering and engineering were restructured.

Revenue controls

The revenue was controlled via:o Setting clear sales objectives and breaking them downo Discounting airfares to maintain loadso Reconfiguring its planes with more economy class seats

Cost controls Quantas reduced its costs by 20% by:

o Cutting flying capacity and cutting services backo Cancelling orders for new planeso Restructuringo Fuel conservation

Limitations of financial reports Quantas’s reports:

o Attached comprehensive notes to its statements to help stakeholderso Were distorted due to special circumstances (cyclone yasi and natural disasters)o Different accounting procedures were utilised.o Did not disclose when their debts needed to be paid

Ethical and legal aspects of financial planning and management Quantas must abide by ethical and legal responsibilities in financial management. They have done this by:

o Having accounts which are certified by professional accounting bodies .o Abiding by the corporations act.o Having the financial reports independently audited.

In 2007, Quantas agreed to a takeover by Macquarie bank for 11.1 billion dollars, but this was not discussed with shareholders. As a result, the takeover did not occur.

Global financial management Exchange rates- This is the value of one currency against the other.

o $Au >> OTHER = appreciation - fuel, payments and capital expense are cheaper. Australians are less likely to travel overseas as its more expensive

o $Au <<OTHER = depreciation - fuel, payments and capital expense are expensive. There are more tourists for Quantas as it is cheaper for them.

Interest rates- The rate charged for the use or paid for the use of money.o Increases in interest rates = increases the interest payments Qantas pays on its borrowings.

Hedging- Strategies utilised to minimise the effect of changes in the global market.o Quantas utilises derivatives such as future interest payments, forward cover and future capital expenditure

payments. This thus allows, them to protect its capital base, exploit its financials, minimize capital costs and to

reduce financial distress.

Topic 4- Human resources

The strategic role of human resources To allow quantas:

o to manage effectively the relationship between employer and employee.

o help organisations like Oantas to achieve its goals, minimise costs, improve quality in working life and ensure

legal compliance.

Interdependence with other Key Business Functions Finance- Funds are required to remunerate staff, e.g. training and development. Marketing- the right staff must be employed and trained so that consumers are satisfied. Operations- many services were cut and the frequency of flights was reduced.

Outsourcing Quantas has outsourced business operations globally in order to become more simple and cost effective. Quantas uses domestic

subcontractors to create cost savings, access greater expertise and to cope with the competitiveness.o The call centre was outsourced to the Melbourne operator sales force.o Domestic voice and data are outsourced to Telstra.o Maintenance jobs were outsourced to Singapore and newzealand

Key influences

Stakeholder influence

Stakeholder explanationEmployees These are the people or staff that work for the organisation (quantas). These include the cabin

crew, ground and admin staff. In 2011-2012 there were many disputes between employees and quantas over conditions and pay.

QUantas management

These are the board members that are involved in the key decisions of Quantas’s future. In 2011- 2012, there was a restructuring of the organisation.

unions Quantas has many employees under unions. These include the Australian workers union, Allied services union and the Australian manufacturing union. They oppose outsourcing and job cuts,

Government organisations

Quantas must abide by policies through departments such as the courts, tribunals and agencies.

Legal influenceo Quantas must abide by state, local and federal laws under HR which include:

Obligations in the workplace such as employment conditions, awards and agreements. Obligations to provide a safe workplace Obligations to take out insurance Obligations to promote equal opportunity

Economic influences These are the fluctuations within the global and national economy. These may affect demands for services and products.

o In 2009, the GFC caused a major reduction in Quantas’s workforce as well as in services. The workforce was reduced from 34400 to 32800.

o Executive pay was frozen.

Technological influences New security systems had to be introduced because of many terrorism acts in the decade. New technologies, e.g. in built entertainment and online check ins were introduced to main competitiveness, but new

skills had to be learnt. Some jobs were lost.

Social influences

More part time and casual employees (casualization)>> reducing costs and improving competitiveness. In addition, there is much more flexibility to cope with the peaks and troughs in demand.

There is a higher proportion of woman in senior roles. There is a more culturally and ethnically diverse workforce. (due to migration and globalization).

Processes of human resource management

Process explanationAcquisition This is the identifying of staff needs in recruitment and selection. This involves a job

analysis so that the job description (defines the scope of activities) can be produced. The possible candidates are tested and examined.

Development This is the developing of the ability to adapt employees to the job. Training is done on the job (internships and job rotation) and off the job (online

courses). This reduces accidents and increases efficiency and the quality of services.

maintenance This is the maintaining of the employee’s interest and motivation in the job. It can be achieved via remuneration (compensation) via 2 ways or both:

o This is paying the employee salaries or rates for their serviceso Providing intrinsic benefits e.g. flexible times and increasing parental leave.

separation This is the leaving of an employee from an corporation.o With the GFC, many employees involuntarily separated.

Strategies in human resource management

Leadership style The autocratic leadership style was utilized in the 1990s where management had the most power over decisions. In recent years, it

has been more democratic and employees have a larger say into decision making.

Job design The various components of Quantas are organized based on functions. The entire job from the baggage handling to the planes is

set so that it is as efficient as possible. Though, the strategies utilized are;o Job enlargement – giving a more varied task list to employeeso Job rotation- allowing employees to move to different taskso Job enrichment- allowing employees to be more responsible and interdependent

Recruitment Applicants are attracted for various jobs. Internal (filing vacancies) and external recruitment (from the outside)

methods are utilised.

Training and development This is done to increased the performance of employees. Pilots undergo over 22000 hours in training and the “Quantas

college online” is utilised to allow staff to learn online. These activities have increased productivity, improved services and enables them to have a more committed

workforce.

Performance management Employees are assessed and measured against benchmarks. (e.g. quality, no. of output) . This motivates poorer

performers to do better. The objectives are to:o To provide a basis for paymentso To assess the success of training and developmento To clarify performance expectations

Rewards These are benefits to the employee for their service so that they may stay motivated and consistent. They may be:

o Monetary- These involve wages and salaries. Higher performers in Quantas gain a higher pay (as a bonus). Superannuation, company cars and maternity leave are provided.

o Non monetary- These are intrinsic benefits, e.g. job recognition, promotion and good relationships.

Dispute resolution Quantas has methods of dispute resolution such as : grievance procedures, negotiation, mediation and court

involvement. o In 2011, the strikes from engineers, pilots and ground staff occurred due to the fact that quantas would not

agree to the terms of a 3% annual rise. o Industrial action occurred. Eventually, arbitration was needed and all the parties had to agree. This was

ratified by fair work Australia.

Effectiveness of human resource management

The effectiveness of human resource management is important as there is no point in implementing costly HRM strategies without measuring how successful it has been. The indicators that are used are below

Indicator explanationStaff turnover This is how much of the staff leave annually.

The turnover rate has increased in 2012 from 4.7% to 5%. This means that HRM has not been effective.

Absenteeism This is the absence from the workforce due to illness. Quantas’s levels have stayed at 9.3% for 2 years.

Accidents This is the amount of accidents that have been working as a result of the tasks. In 2011, the injury rate was reduced from 41.5% to 35.3%. This means that those

employees are available for longer and no replacements are required.Levels of disputation This is the amount of tension between the corporation and the employees.

In recent years, there have been high amounts of strikes and industrial actions due to the recent action to axe jobs, introduce part time employees and outsourcing.

Worker satisfaction This is how happy workers are at the organisation. It is related to motivation and productivity. It is hard to measure and quantas analyses it via surveys, invitations for employee feedback.